The growing sales figure for consumer electronic goods, a flourishing telecom/networking market and noteworthy growth in the use of portable/wireless products are some of the significant trends observed in India at present, which are providing stimulus to the growth of the semiconductor design industry to a greater scale.
India has a well-developed semiconductor design industry, with 120 design units and is ranked second among countries such as the US, the UK, Germany, Sweden, China, Taiwan and Israel in terms of design revenues. Subsequently, various global integrated device manufacturers (IDMs) have established their captive design centres in the country. The country’s electronics market is also growing fast and is expected to boost the demand for semiconductor components in the future.
Electronics is essential for setting up a technology infrastructure, and semiconductors are the main component of electronics products. Electronics sales in India, which totalled US$ 40.7 billion in 2009, are expected to reach US$ 400 billion by 2020. At present, local manufacturing accounts for about 40 per cent of consumption and it could increase to 80 per cent by 2020. Many global original equipment manufacturers (OEMs) and EMS firms, including Samsung, LG, Nokia, Toyota, Hyundai, Flextronics, Jabil, Foxconn, Sanmina, Elcoteq and Celestica, have set up manufacturing facilities in India in recent years, according to India Electronics & Semiconductor Association (IESA).
The last five years have been important for the industry which has witnessed a critical shift toward end-to-end chip design services and electronics system design and manufacturing (ESDM). This has birthed many indigenous design services companies, some of which have ventured into niche markets in the areas of wireless, analog and Intellectual Property (IP) building blocks and specialised design services.
In 2011, the industry spent US$ 60 billion on research and development (R&D), of which about 20 per cent was outsourced to India. The country is also projected to garner one-fourth of the global engineering services outsourcing (ESO) business by 2020, generating an impressive US$ 40 billion.
Rising demand and availability of talent is expected to boost growth in the semiconductor design market. By 2020, the semiconductor design market in India is expected to increase to US$ 60 billion from US$ 9.9 billion in 2012.
Semiconductor industry, which is now an inseparable part of almost all sectors, has emerged as one of the most important industries. It forms an essential part of all electronic items. It defines how efficiently and smartly we live. In India, after Bangalore, Noida has become a hub for semiconductor design industry with many major players establishing their offices and R&D centres in the region. Global MNCs such as Freescale, Mentor Graphics and Interra Systems have setups in Noida.
The electronics sector has attracted foreign direct investment (FDI) worth Rs 6,020.59 crore (US$ 992.93 million) during the period April 2000 to January 2014, according to the data released by the Department of Industrial Policy and Promotion (DIPP), Government of India.
Some of the major investments in Indian semiconductor industry include:
To complement the targeted reduction in import bill, the Government of India has proposed a minimum investment of US$ 555 million for semiconductor manufacturing plants and US$ 222 million for ecosystem units. This is considered a major step toward attracting foreign companies to set up manufacturing facilities in India. It has also removed central taxes and duties for 10 years in high-tech facilities such as semiconductor fabricating units.
Some of the initiatives taken by the Indian government for boosting the semiconductor industry of the country are as follows:
"A lot of the local demand for electronics in India is currently being catered to by imports. As the demand for electronics products grows, many global players, both original equipment manufacturers (OEMs) and electronics manufacturing services (EMS) firms will look at manufacturing within India itself. This will automatically lead to an increased market for semiconductors," as per Mr Sanjeev Keskar, Managing Director-Sales, PMC-Sierra India.
The key drivers for the semiconductor market in India include telecom infrastructure equipment, wireless handsets, notebooks and other IT and office automation products, set-top boxes and smart cards. Growth sectors including health care equipment, automotive, consumer goods and industrial goods—all of which increasingly use electronics—are also expected to boost semiconductor consumption in India.
Exchange rate used: INR 1 = US$ 0.0164 as on April 26, 2014
References: Media reports, India Semiconductor Association, Ministry of Information Technology, CIOL, Wharton School